MADRID (Reuters) - Spanish retailer DIA (DIDA.MC) swung to a sharply worse net loss in the first half on falling sales, supply disruptions and one-off costs related to store closures, but said on Monday a key indicator of its performance was starting to recover.

Years of lagging peers who lured customers by investing more heavily in their stores brought the retailer to the brink of insolvency just days after Russian tycoon Mikhail Fridman’s LetterOne (L1 fund) raised its stake to 70% in May.

Giving the first update on its progress since the takeover, the company said its net loss in the first half totalled 418 million euros (£371.6 million), much worse than a loss of 29.5 million euros posted in the same period last year.

But it said same-store sales, one of the sector’s most vital statistics, though down 7.8% in the first half, fell less in July and August after posting a record fall of 15.5% in June.

The company, which promised to present an updated long-term business plan at the end of the year, partly blamed the loss on one-off factors including layoffs in Spain and Brazil and the closure of 663 stores.

It also said write-offs and changes to its franchising structure all contributed to the loss in the first six months of the year.

A familiar brand on Spanish high streets, DIA is due to carry out a capital increase to pay back L1 for a loan it made in July which allowed the company to pay bondholders and help improve its equity position.

Investors punished DIA for a series of profit warnings and the decision to stop paying dividends with a broad sell-off that destroyed most of its market value. It dropped out of Spain’s blue-chip index last December.

It shares fell a further 3.4% in early trading on Monday.

DIA said last week it had decided to keep the cosmetics store chain Clarel, rowing back on moves by its previous management to sell the unit.

Chief Executive Karl-Heinz Holland, former head of German discounter Lidl and DIA’s third CEO in just over a year, acknowledged the scale of the challenge presented by the turnaround.

“DIA’s new management is fully aware of how demanding the situation is,” he said in a statement. “Every day there will be improvements and changes, which will take some time.”